New details on the 2019 Xbox Gift Card Fraud Case have been released, providing more insight into the story of how an employee abused their company’s flaws.

New details have been released about the 2019 Xbox gift card fraud case. The case involved a Microsoft employee responsible for testing the company’s market, specifically its gift cards. The perpetrator found a flaw in the system, but decided to use it for his own benefit rather than report it. The result was a plan worth $ 10 million.

Gift cards work by generating a code, usually a string of 25 letters and digits known as a 5×5 code. Each 5×5 is attached to a certain dollar amount, such as $ 15 or $ 50. The code is then printed on a physical gift card or emailed to the buyer. If the code is not used, like many, it is pure profit for the company. For this reason, it is not unreasonable to consider gift cards as a kind of virtual currency, similar to Bitcoin. However, both systems have their flaws, which a Microsoft employee was more than happy to abuse.

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Volodymyr Kvashuk is the man behind the $ 10 million Xbox gift card fraud case. He was convicted of fraud, identity theft and money laundering in February 2020 and was sentenced to nine years in prison. A new report published by Bloomberg details how he did it. Kvashuk was hired by Microsoft to test the online marketplace for flaws and errors, using bogus credit card accounts provided by the company. However, even though the accounts were programmed so that Microsoft would not ship the physical products you ordered during testing, the Xbox gift card codes generated with the test accounts were real.

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By logging into his coworkers’ accounts, which was possible due to weak and guessable passwords, Kvashuk was able to obtain thousands of codes for essentially free. He then sold them online to other Bitcoin scammers. With the fluctuating value of Bitcoin, Kvashuk was able to earn cash with minimal effort. He even bought a Tesla and lakeside property with fraudulent funds. Meanwhile, his co-workers supposedly thought he was quite a nice guy. He was a good collaborator and never got rich. But its buyers weren’t so oblivious.

More than a few of Kvashuk’s customers received incorrect codes, prompting them to report the problem to Microsoft. This included Kvashuk’s biggest buyer, a merchant from China named Makoo. Microsoft was already leading an internal investigation after a spike in gift card purchases and use. Two employee test accounts were blocked after the investigation, but a third account quickly replaced them. It was also closed. The perpetrator was obviously an employee with access to the other logins, and some irregular activities and careless errors in the schema were pointing to Kvashuk. He was confronted, fired, and federal agents raided his home on July 16, 2019. Agents found USBs loaded with 5×5 codes, bank account information, a large amount of cash, and even a “wish list” of future “investments.” The evidence was damning.

While Kvashuk was eventually found, tried, and sentenced, his story remains a reminder for businesses and individuals alike. Virtual currencies like gift cards and Bitcoin are easier to launder and abuse than cash. Real money shouldn’t be used in a test environment, and strong passwords are a bigger hurdle for scammers than many realize. Kvashuk may have been caught, but his scam exposed a bigger problem in online marketplaces. There are still plenty of scammers poised to fill the void he left, but they’re unlikely to be as careless as Kvashuk was.

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Fountain: Bloomberg

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